PROMOTIONAL SHARES ESCROW AGREEMENT
Class B Issuer
This Promotional Shares Escrow Agreement ("Agreement"), which was entered into
on the _____ day of __________, 2001, by and among XXXXXXXXX.XXX CORP.
("Issuer"), whose principal place of business is located at 0000 Xxxxxx Xxxxxx,
Xxxxxxxxx, XX 00000 and the Securityholders listed on Exhibit A hereto (the
"Depositors"); and Citizen Bank (the "Escrow Agent"), whose principal place of
business is located at 00 Xxxxx Xxxxxx, Xxxxxx XX 00000 and which is domiciled
in Massachusetts (all of whom are herein collectively referred to as
"Signatories"), witnesses that:
A. The Issuer has filed an application with the Securities
Administrators of the States listed on Exhibit B hereto
(collectively, the "Administrator") to register certain of its
Equity Securities for sale to public investors who are residents of
these states;
B. The Depositors are the owners of the shares of common stock or
similar securities and/or possess convertible securities, warrants,
options or rights which may be converted into, or exercised to
purchase shares of common stock or similar securities ("Equity
Securities") listed opposite their names on Exhibit A;
C. As a condition to registering the Issuer's Equity Securities, the
Depositors, who are security holders of the Issuer and who, for the
purposes of this Agreement, are deemed to be Promoters of the
Issuer, have agreed to deposit the Equity Securities listed opposite
their names on Exhibit A ("Promotional Shares"), which is attached
hereto and made a part hereof, with the Escrow Agent; and
D. The Signatories have agreed to be bound by the terms of this
Agreement.
THEREFORE, the Signatories agree as follows:
1. DEPOSIT OF PROMOTIONAL SHARES. The Depositors' Promotional Shares
have been deposited into an Escrow Account ("Escrow") with the
Escrow Agent, and the Escrow Agent hereby acknowledges the receipt
thereof.
2. EXERCISE OR CONVERSION OF PROMOTIONAL SHARES. If the Promotional
Shares have exercise rights or conversion rights, the Escrow Agent
shall, upon receipt of the Issuer's written request, provide the
documents that evidence and/or which are necessary to execute the
exercise rights or conversion rights. The exercised or converted
Promotional Shares shall remain in escrow subject to the terms of
this Agreement.
3. TERM. The Term of this Agreement and the escrow shall begin on the
date that the public securities offering relating thereto ("public
offering") is declared effective by the Administrator. The
Promotional Shares shall be held by the Escrow Agent until they are
released in accordance with paragraph 4., below.
4. RELEASE OF PROMOTIONAL SHARES.
a. Subject to the documentation requirements in paragraph 5.,
below, the Escrow Agent shall release the Promotional Shares
in the following manner.
(1) Beginning two years from the completion date of the
public offering, two and one-half percent (2 1/2%) of
Promotional Shares held in escrow may be released each
quarter pro rata among the Depositors. All remaining
Promotional Shares shall be released from escrow on the
fourth anniversary from the completion date of the
public offering.
(2) One hundred percent (100%) of the Promotional Shares
shall be released from escrow if:
(a) The public offering has been terminated, and no
securities were sold pursuant thereto; or
(b) The public offering has been terminated, and all
of the gross proceeds that were derived therefrom
have been returned to the public investors.
b. In the event of a dissolution, liquidation, merger,
consolidation, reorganization, sale or exchange of the
Issuer's assets or securities (including by way of tender
offer), or any other transaction or proceeding with a person
who is not a Promoter, which results in the distribution of
the Issuer's assets or securities ("Distribution"), while this
Agreement remains in effect, the Depositors agree that:
(1) All holders of the Issuers Equity Securities will
initially share on a pro rata, per share basis in the
Distribution, in proportion to the amount of cash or
other consideration that they paid per share for their
Equity Securities (provided that the Administrator has
accepted the value of the other consideration), until
the shareholders who purchased the Issuer's Equity
Securities pursuant to the public offering ("Public
Shareholders") have received, or have had irrevocably
set aside for them, an amount that is equal to one
hundred percent (100%) of the public offering's price
per share times the number of shares of Equity
Securities that they purchased pursuant to the public
offering and which they still hold at the time of the
Distribution, adjusted for stock splits, stock dividends
recapitalizations and the like; and
(2) All holders of the Issuer's Equity Securities shall
thereafter participate on an equal, per share basis
times the number of shares of Equity Securities they
hold at the time of the Distribution,
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adjusted for stock splits, stock dividends,
recapitalizations and the like.
c. The Distribution may proceed on lesser terms and conditions
than the terms and conditions stated in paragraph 4.b., above,
if a majority of the Equity Securities that are not held by
Depositors, officers, directors, or Promoters of the Issuer,
or their associates or affiliates vote, or consent by consent
procedure, to approve the lesser terms and conditions.
d. In the event of a dissolution, liquidation, merger,
consolidation, reorganization, sale or exchange of the
Issuer's assets or securities (including by way of tender
offer), or any other transaction or proceeding with a person
who is a Promoter, which results in a Distribution while this
Agreement remains in effect, the Depositors' Promotional
Shares shall remain in escrow subject to the terms of this
Agreement.
e. In the event securities in the escrow become "Covered
Securities," as defined by the National Securities Markets
improvement Act of 1996, all securities held in escrow shall
be released
5. DOCUMENTATION REGARDING THE RELEASE OF PROMOTIONAL SHARES.
a. A written request for release of the Promotional Shares
("request for release"), based upon paragraph 4. above, shall
be forwarded to the Escrow Agent.
(1) A request for release based upon-paragraph 4.a.(2)(a) or
(b) above, shall be accompanied by a certification from
the underwriter (if applicable) and the Issuer's Chief
Executive Officer or Chief Financial Officer which
states that the public offering has been terminated and
that the conditions of paragraph 4.a.(2)(a) or (b)
above, have been met.
6. RESTRICTION ON THE TRANSFER, SALE OR DISPOSAL OF PROMOTIONAL SHARES.
While this Agreement is in effect, no Promotional Shares, any
interest therein or any right or title thereto, may be sold,
transferred, hypothecated or otherwise disposed of ("transfer" or
"transferred"), except as noted below, and the Escrow Agent shall
not recognize any transfer that violates the terms of this
Agreement. The Promotional Shares may not be transferred until the
Escrow Agent has received a written statement, signed by the
proposed transferee ("transferee"), which states that the transferee
has full knowledge of the terms of this Agreement, the transferee
accepts the Promotional Shares subject to the terms of this
Agreement, and the transferee realizes that the Promotional Shares
shall remain subject to the terms of the Agreement until they are
released pursuant to paragraph 4. above.
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a. Promotional Shares may be transferred by will, the laws of
descent and distribution, the operation of law, or by order of
any court of competent jurisdiction and proper venue.
b. Promotional Shares of a deceased Depositor may be hypothecated
to pay the expenses of the deceased Depositor's estate. The
hypothecated promotional Shares shall remain subject to the
terms of this Agreement. Promotional Shares may not be pledged
to secure any other debt.
7. VOTING POWER. With the exception of paragraphs 4.b. and c. above,
the Promotional Shares shall have the same voting rights as similar,
non-escrowed Equity Securities. If the Promotional Shares are
registered in the Escrow Agent's name, the Escrow Agent shall vote
those Promotional Shares in accordance with the Depositors' written
instructions.
8. DIVIDENDS, STOCK SPLITS AND RECAPITALIZATIONS. All certificates
representing stock dividends and shares resulting from stock splits
of escrowed shares, recapitalizations and the like, that are granted
to or received by Depositors while their Promotional Shares are held
in Escrow shall be deposited with and held by the Escrow Agent
subject to the terms of this Agreement. Any cash dividends that are
granted to or received by the Depositors while their Promotional
Shares are held in escrow, shall be promptly deposited with and held
by the Escrow Agent subject to the terms of this Agreement unless
such cash dividends are approved by a majority of the independent
directors of the Issuer. The Escrow Agent shall invest cash
dividends as directed by the Depositors.
9. ADDITIONAL SHARES. With respect to Equity Securities received by the
Depositors as the result of the conversion of the Depositors'
convertible securities and/or the exercise of Depositors' options,
warrants or rights listed on Exhibit A, while their Promotional
Shares are held in escrow, shall be promptly deposited with the
Escrow Agent as Promotional Shares subject to the terms of this
Agreement. These Promotional Shares shall be distributed to the
Depositors when their Promotional Shares are released from escrow
pursuant to paragraph 4. above.
10. RELIANCE BY ESCROW AGENT. The Escrow Agent shall be protected if it
acts in good faith upon any statement, certificate, notice, request,
consent, order or other document which it believes to be genuine,
conforms with the provisions of the Agreement and is signed by the
proper party. The Escrow Agent's sole responsibility shall be to act
in accordance with the terms expressly set forth in this Agreement.
The Escrow Agent shall be under no obligation to institute or defend
any action, suit or proceeding in connection with this Agreement
unless it receives reasonable indemnification and advancement of
fees and costs. The Escrow Agent may consult counsel with respect to
any question arising under this Agreement. The Escrow Agent shall
not be liable for any action taken or omitted, in good faith, upon
the advice of counsel. In performing its duties hereunder, the
Escrow Agent shall not be liable to anyone for any damage, loss,
expense or
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liability other than for that which arises from the Escrow Agent's
failure to abide by the terms of this Agreement.
11. ESCROW AGENT'S COMPENSATION. The Escrow Agent shall be entitled to
receive reasonable compensation from the Issuer for its services as
set forth in Exhibit C, which is attached hereto and made a part
hereof. If the Escrow Agent is required to render additional
services that are not expressly set forth therein, or if it is made
a party to or intervenes in any action, suit or proceedings
pertaining to this Agreement ("Additional Services"), it shall be
entitled to receive reasonable compensation from the Issuer and the
Depositors. If Additional Services are provided, the Escrow Agent,
after giving written notice to the Depositors and the Issuer, may
deduct reasonable compensation from the cash dividends, interest and
proceeds being held for distribution pursuant to paragraphs 4.b., c.
and d., or 8. above.
12. ESCROW AGENT'S INDEMNIFICATION. The Issuer and the Depositors agree
to hold the Escrow Agent harmless from, and indemnify the Escrow
Agent for, any cost or liability regarding any administrative
proceeding, investigation, litigation, interpretation,
implementation or interpleading relating to this Agreement,
including the release of Promotional Shares, the Distribution, and
the disbursement of dividends, interest or proceeds, unless the cost
or liability arises from the Escrow Agent's failure to abide by the
terms of this Agreement.
13. INDEPENDENCE OF THE ESCROW AGENT. The Issuer hereby represents that
all of its officers, directors and Promoters are listed on Exhibit
D, which is attached hereto and made a part hereof. The Escrow Agent
hereby represents that it is not affiliated with the Issuer, the
Depositors, or the Issuer's officers, directors or Promoters who are
named in Exhibit A or Exhibit D.
14. SCOPE. This Agreement shall inure to the benefit of and be binding
upon the Depositors, their heirs and assignees, and upon the Issuer,
Escrow Agent, and their successors.
15. SUBSTITUTE ESCROW AGENT. The Escrow Agent may, upon not less than
sixty (60) days prior written notice to the Issuer, the Depositors,
and the Administrator, resign as the Escrow Agent. The Issuer and
the Depositors shall, before the effective date of the Escrow
Agent's resignation, enter into a new identical Escrow Agreement
with a substitute Escrow Agent. The successor Escrow Agent must be
satisfactory to the Administrator. If the Issuer and the Depositors
fail to enter into a new Escrow Agreement and appoint a successor
Escrow Agent within sixty (60) days after the Escrow Agent has given
notice of its resignation, the Escrow Agent then serving under this
Agreement shall retain the Promotional Shares in escrow until a new,
identical Escrow Agreement has been executed and a successor Escrow
Agent has been appointed. The Escrow Agent shall not be liable for
retaining the Promotional Shares in escrow for a reasonable time to
determine the proper disposition of those shares.
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16. TERMINATION. Except for the compensation and indemnification
provisions of paragraphs 11. and 12. above, which shall survive
until they are satisfied, this Agreement shall terminate in its
entirety when all of the Promotional Shares have been released, or
the Issuer's Equity Securities and/or assets have been distributed
pursuant to paragraph 4. above.
17. Pursuant to the requirements of this Agreement, the Signatories have
entered into this Agreement, which may be written in multiple
counterparts and each of which shall be considered an original. The
Signatories have signed the Agreement in the capacities, and on the
dates, indicated.
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IN WITNESS WHEREOF, the Signatories have executed this Agreement.
DEPOSITORS: DATE
_________________________________ ____________________________
Xxxxx Xxxxxx
_________________________________ ____________________________
Xxxxx Xxxxxx 1997 IRRV Trust
_________________________________ ____________________________
Allied Financial Voting Trust
_________________________________ ____________________________
Xxxxxxx Xxxxxxx
_________________________________ ____________________________
Xxxxx Xxxxxxxx
_________________________________ ____________________________
Xxxx X. Xxxxxx
_________________________________ ____________________________
Xxx Xxxxx
_________________________________ ____________________________
Xxxxxxx X. Xxxxx
_________________________________ ____________________________
Xxxx X. Xxxxxxx
ISSUER
XXXXXXXXX.XXX CORP.
By _________________________________
Name: Xxxxx Xxxxxxx
Title: President
ESCROW AGENT
CITIZEN BANK
By _________________________________
Name:
Title:
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Exhibit A
Number of Shares
Name Beneficially Owned
---- ------------------
Xxxxx Xxxxxx....................................... 5,000,000
Xxxxx Xxxxxx 1997 IRRV Trust....................... 20,000,000
Allied Financial Voting Trust...................... 5,000,000
Xxxxxxx Xxxxxxxx................................... 300,000
Xxxxx Xxxxxxxx..................................... 200,000
Xxxx X. Xxxxxx..................................... 300,000
Xxx Xxxxx.......................................... 50,000
Xxxxxxx X. Xxxxx................................... 50,000
Xxxx X. Xxxxxxx.................................... 100,000
